UK Government To Ask International Banks To Agree Tougher Bonus Rules Wed
13 October 2009 - 3:36AM
Dow Jones News
The U.K. government this week will ask about a dozen
international banks including the U.S.' Citigroup Inc. (C) and
Goldman Sachs Group Inc. (GS) to toughen the terms of bonuses they
pay to U.K. employees, in an effort to contain public anger as
banks enjoying the benefits of government stimulus start paying out
what are expected to be bumper 2009 bonuses.
The Wednesday meeting with 10 banks that also include JPMorgan
Chase & Co. (JPM), Deutsche Bank AG (DB) and Nomura Holdings
Inc. (NMR) is being held two weeks after the U.K. Treasury got the
country's five largest banks to agree to reform their remuneration
structures by complying with a code issued by the Financial
Services Authority in August. The FSA code, which comes into effect
Jan. 1, is broadly inline with remuneration reforms set out at the
Group of 20 leaders summit last month.
By getting commitments now, the government is hoping to
demonstrate the U.K.'s leadership on implementing the G20 rules,
while appeasing public frustration that some bankers are still
reaping big rewards despite the ongoing financial crisis.
Barclays PLC (BCS), Standard Chartered PLC (STAN.LN), Lloyds
Banking Group PLC (LYG), Royal Bank of Scotland Group PLC (RBS) and
HSBC Holdings PLC (HBC) agreed Sept. 30 to follow the FSA
remuneration code for their 2009 bonus payments, in measures that
include spreading out two-thirds of bonus payments to senior
employees over three years.
In a joint statement, those banks said it is essential that
remuneration rules should be implemented globally, to ensure a
level playing field. Banker pay and bonuses have been a hot topic
across the globe as investors and taxpayers look for scapegoats in
the financial crisis.
While the U.S., European and Asian banks active in the U.K. are
expected to signal their agreement with the G20 principles, it
isn't clear that they will unequivocally sign on for the FSA code -
some of which consists of points of guidance rather than watertight
rules.
Many of the banks say privately that their pay practices are
already inline with the guidelines.
Other banks invited to the Wednesday meeting include UBS AG
(UBS), Morgan Stanley, Bank of America (BAC) and BNP Paribas SA
(BNP.FR).
-By Margot Patrick, Dow Jones Newswires; +44 (0)20 7842 9451;
margot.patrick@dowjones.com
(Patricia Kowsmann and Laurence Norman contributed to this
report.)